- Geopolitical tensions in Eastern Europe aggravate inflationary pressures
- Rand/Pula exchange rate unfavourable and costly to businesses
Botswana businesses expect high cost pressures to persist in the first quarter of 2023 mainly due to supply constraints arising from the Ukraine-Russia war.
This is according to the Bank of Botswana (BoB) which recently released the December 2022 Business Expectations Survey (BES) that it conducted by collecting information on the domestic business community’s perceptions about the prevailing state of the economy and expectations during the survey period.
In the report BoB says export-oriented firms in particular are becoming pessimistic in the first quarter of 2023, possibly due to the continued expected disruptions in world markets and inflationary pressures arising from the Russia-Ukraine war.
However, the report goes on to outline that these export-oriented firms regain their optimism in the year ending December 2023. Meanwhile, with regard to price developments in the fourth quarter of 2022, firms expect cost pressures to continue rising due to the geopolitical tensions in Eastern Europe.
In factors affecting business conditions in the fourth quarter of 2022, companies, specifically those in the Mining and Quarrying; Manufacturing; Construction and Real Estate sectors viewed the Rand/Pula exchange rate as unfavourable and therefore costly to doing business as the Pula was not strong enough against the South African Rand. “This is because these firms source most of their raw materials from South Africa,” BoB highlights in the BES report.
Overall, the survey shows firms as more optimistic about business conditions in the fourth quarter of 2022 compared to the previous quarter, which was reflected in anticipated improvement in investment in plant, machinery, buildings and other investment for the period. “This improvement mainly reflects a continued domestic economic recovery following relaxation of COVID-19 restrictions as well as implementation of the Economic Recovery Transformation Plan (ERTP), among others.”
However, the central bank notes in the that firms expect business conditions to be suppressed slightly in the first quarter of 2023 but to improve in the 12-month period to December 2023. The December 2022 BES Report presented business expectations about the current period under (Quarter 4:2022), the first quarter of 2023 (Q1:2023); and the 12-month period from January 2023-December 2023 (Q1:2023-Q4:2023) and sampled 100 businesses from 13 economic sectors.
